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Tuesday, March 25, 2008

Goldman Predicts $460 billion in leveraged credit losses

by Calculated Risk on 3/25/2008 02:41:00 PM

From Bloomberg: Wall Street May Face $460 Billion Credit Losses, Goldman Says

Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the subprime mortgage market ... according to Goldman Sachs Group Inc.
A few excerpts from the report: Leveraged Losses—Still Out There (no link)
Residential mortgage losses will represent about half the damage, with another 15%-20% coming from commercial mortgages. Credit card loans, auto loans, commercial and industrial lending, and nonfinancial corporate bonds make up the remainder.
The losses to leveraged US financial institutions make up only a part of total credit losses, which we expect to be $1.2 trillion.
Thus far, our banks team has tallied approximately $120 billion in announced writeoffs from US leveraged institutions since the credit crisis began (including foreign institutions, this number rises to about $175 billion).
Most of the write-offs to date relate to residential mortgages, so here we may be halfway through the process, perhaps even a bit further. Elsewhere, though, we suspect significant write-offs remain in store, even after the full set of first-quarter results for financial firms becomes available.
It's hard to tell the actual losses to date, because hedge funds will probably not announce losses, and some losses are actually gains for other institutions. But it appears that the process has just started for commercial mortgages, credit card and auto loans, corporate bonds, and other lending.